If you want to have a glimpse at how expert investors play the stock market, you can do so by looking at the long-term performance of hedge funds’ popular picks from 2015.
Hedge funds may be right or wrong in the short term about a particular stock or sector. Predicting short term share price action using fundamental analysis is extremely difficult, if not impossible. Heck, even the most experienced day traders and investors have plenty of bust moments as well. You may view hedge funds as not worth monitoring, since their returns have been underperforming the market in recent years. But we have to consider that this underperformance is because these funds hedge (hence the name) and charge huge fees. Hedge funds are also like many other companies in that they bundle products (in this case, stock picks) together and sell them to customers (investors) as a package deal. That means you get their 73rd-best pick along with their best pick, and who wants to pay exorbitant fees for a fund’s 73rd-best idea when you could instead invest in only their best ideas?
Investors can outperform the market by imitating their consensus picks, because believe it or not, hedge funds are usually good at picking stocks. That’s what we do at Insider Monkey. We track over 700 of the most successful hedge funds ever in our database and identify only their best stock picks. Our flagship strategy has gained 44% since February 2016 and our stock picks released in the middle of February 2017 gained over 5 percentage points in the three months that followed. Our latest stock picks were released last month, which investors can gain access to by becoming a subscriber to Insider Monkey’s premium newsletters.
In this article, we’ll look at the long-term performance of hedge funds’ most popular stock picks from early-2015. Unsurprisingly, the results are strong. The top 5 most popular stocks among hedge funds have had an average return of 33.82% over the last two years, compared with a gain of only 14.12% for the SPDR S&P 500 ETF Trust.
The stocks’ performance was calculated using the May 31, 2015 to May 31, 2017 period. The results take into account the significant stock value decline of one of those companies, as well as two companies’ meteoric outperformance on the market. These consensus stock picks are based on the Q1 2015 13F filings of hedge funds, released by mid-May 2015 (holdings as of March 31, 2015). Thus, readers would’ve had a nearly two-week-long window after our article was released (May 19, 2015) to buy those stocks.
Insider Monkey provides a more detailed discussion on each top pick over the next few pages, as we continue looking at the long-term performance of hedge funds’ popular picks from 2015. Those picks were Allergan plc Ordinary Shares (NYSE:AGN), Alphabet Inc (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), Citigroup Inc (NYSE:C), and Facebook Inc (NASDAQ:FB), and they are ranked on this list according to the number of hedge funds invested in these companies as of March 31, 2015.